The Entrepreneurial View

For Small Business, As Good As It Gets These Days?

by Raymond J. Keating

Small businesses are under policy constant assault from elected leaders these days.

For example, the Obama health care measure means increased costs and fewer choices in terms of health insurance coverage for the business community and workers due to higher taxes, more mandates, and increased regulation.

The financial regulatory legislation signed into law this month promises to raise the costs of and reduce access to credit.

And just five months from now, tax increases are scheduled - including higher personal income, capital gains, dividends and death taxes - which will reduce resources available for investment in small businesses, and diminish incentives for critical risk taking in our economy.

Yet, the political rhetoric stands in sharp contrast to these policy and economic realities. Stopping at a small business in New Jersey on July 28, President Obama declared: "Helping small businesses, cutting taxes, making credit available. This is American as apple pie. Small businesses are the backbone of our economy. They are central to our identity as a nation. They are going to lead this recovery."

I could not agree more with such sentiment. Unfortunately, the President's economic agenda accomplishes the exact opposite of what he says.

Amidst this tax and regulatory onslaught, a small piece of legislation being pushed by the President and under consideration in the U.S. Senate is billed as pro-small business.

There seem to be positives in the mix, such as allowing for "bonus depreciation" in 2010 and increasing the small business expensing level from $250,000 to $500,000. Unfortunately, lack of permanency wipes out the effectiveness of such measures.

The bill also would create a $30 billion Treasury Department program for small business lending, which would be channeled through community banks. That's simply another government bailout measure that places taxpayer dollars at risk, including taxes paid by entrepreneurs, small businesses and their employees.

If okayed by the Senate, differences with an earlier-passed version in the House would have to be worked out.

Small businesses and the U.S. economy need a heck of a lot more than is being discussed with this bill. Immediately, the tax and regulatory madness must stop, and be rolled back.

Broadbased, substantial and permanent tax relief is necessary. That would include, for example, cutting personal and corporate income tax rates; making expensing of capital expenditures a permanent option for all businesses and investments; allowing the death tax to remain dead, permanently; and either eliminating the capital gains tax, or indexing gains for inflation. All of this, of course, must be accompanied by a serious effort to rein in the massive expansion of government spending that has taken place in recent years.

Perhaps the so-called small business bill being debated right now is as good as it gets these days. Unfortunately, entrepreneurs, investors and our entire economy need a heck of a lot more.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.